Citigroup cuts total pay as it reports $1.6bn loss

Citigroup has cut its total pay and bonus pot by 20pc for 2009 after failing
to make a profit for the second year running, although payouts to bankers
will be largely flat as a result of a fall in the number of employees.

Citigroup has received a total of $45bn (£27bn) in capital from the US TreasuryPhoto: Reuters

The banking conglomerate, which has booked in excess of $100bn (£61bn) of losses and write-downs since the financial crisis began in 2007, reduced total compensation by more than $6bn to $24.98bn in the year ending December. The move follows a $7.6bn loss in the fourth quarter, resulting in a full-year post-tax loss of $1.6bn. In 2008 it reported a $28bn loss.

However, the percentage of compensation to revenue – the metric used by the banking industry to measure pay levels – actually rose, from 29pc to 32pc over the year, as full-year revenues fell by 28pc to $76.6bn.

As a result, the average Citigroup employee earned $94,264 in pay and bonus last year, down from $99,943 the preceding year. This is partly down to the bank reducing staff numbers by 18pc in the year. However, for members of Citigroup's investment bank, the average payout will be much higher. On both sides of the Atlantic many staff are expecting seven-figure deals.

Citigroup is expected to be one of the largest contributors to the US President's proposed banks tax, which is designed to cover the expected $90bn deficit stemming from the Treasury's $700bn Troubled Asset Relief Programme. (TARP). Citigroup's $7.6bn fourth-quarter loss was largely a result of the cost associated with exiting the TARP last month.

Vikram Pandit, chief executive, said $6.2bn of the loss was related to the decision to repay $20bn of TARP funds, made possible by the issue of 23m new shares last month.

Mr Pandit said the bank had made "enormous progress" in 2009, and that "it was our responsibility to get our house in order".

The US Treasury still owns a 34pc stake in Citigroup, although it intends to sell down the holding by the end of this year.

John Gerspach, the bank's chief financial officer, said there are signs the economic recovery is beginning to take hold outside the US, and added that the large part of the bank's corporate credit business is beginning to stabilise.

He added that the bank's investment banking arm – which helped to counter-balance declining revenues from its retail bank last year – will continue to prosper.